MKTG Sells DM Operations to CBC

Two companies will operate under the MKTG Services name when the publicly traded firm sells its direct marketing operations to privately held CBC Companies for $11 million in cash, plus related liabilities.

The sale, announced last week, includes the company's DM operations in New York, Boston and Philadelphia, which provide list management, list brokerage, data compilation and database marketing. The deal is to close within 30 days.

Once the sale closes, however, MKTG will continue to share its name and CEO with its former division.

"The direct marketing businesses will continue as MKTG Services," said Jeremy Barbera, who will be chairman/CEO of both companies. "We're not changing it. It will continue as a CBC company."

Barbera also said the headquarters would stay in New York and that all employees would be kept on.

The public company will be renamed at a later date, but a new name has not been chosen, he said.

CBC, the fourth-largest credit bureau after Equifax, Experian and TransUnion, could not be reached for comment.

"The reason that they're not public is that they like their privacy," Barbera said.

Even so, he shared the company's motivation for the purchase.

"Experian and Equifax have marketing services units within their companies. CBC does not, so that's one of the principal reasons why this is attractive to them," he said.

As for MKTG's direct marketing business within CBC, Barbera said the deal gives it financial, technological and data resources that it previously lacked.

"We become among the top two or three list companies in the nation, and none of them will have the financial strength that we now have," he said. "How many list companies right now are owned by a parent that has $100 million in the bank?"

MKTG's direct marketing division manages list properties such as the Verizon customer files, Kiplinger and Lycos as well as an extensive roster of publishing files and other types of lists.

CBC has an enormous data center, and much synergy exists between each firm's data, Barbera said, adding that announcements about new products or services probably would be made in the new year.

CBC subsidiary Innovis Data Solutions provides consumer credit information, including data on consumers who are late payers and new-mover data. CBC bought Innovis from First Data Corp. in April 1999. Mortgage financing companies Fannie Mae and Freddie Mac started reporting consumers' payment histories to Innovis in early 2001.

Last month, CBC sold some consumer credit files and customer contracts from certain states to Equifax Inc. for $95 million in cash. Aside from its status as a credit bureau, CBC also provides collection services, employment screening, real estate screening and flood zone determination.

Meanwhile, the publicly traded MKTG will be left with its telemarketing and telefundraising division in Los Angeles, which Barbera said has been profitable for 18 years.

"The public company will have a very strong balance sheet, and its only operation will be profitable," he said. "We've simplified the business, and I think it's time to start growing again."

In the late 1990s, when its stock was soaring, MKTG -- then known as MSGi -- went on an acquisition spree, buying several direct marketing companies including list firms Media Marketplace, Stevens-Knox & Associates Inc. and The Coolidge Co. as well as DM agency Grizzard Communications Group.

When the economy and its share price turned downward, MKTG began unloading business units with the sale of subsidiary e-mail technology firm WiredEmpire to Naviant Marketing Solutions in January 2001. It also began reviewing strategic options with financial adviser Goldman Sachs.

A month later, it cut staff and reorganized internally in an effort to generate more than $5 million in annual cost savings. That restructuring included eliminating several executive positions, consolidating administrative operations and closing its Pegasus Internet division, which provided Web services to the arts and entertainment community.

In July 2001, it sold Atlanta-based Grizzard to Omnicom Group Inc. for $91.3 million.

In late March, MSGi officially changed its name to MKTG Services Inc. According to a letter the company sent to clients, the name change was the next step after spending much of last year consolidating assets and strengthening traditional services.

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